You purchase a fully-occupied shopping center for $5,000,000. The NOI is $750,000. The property has no...

You purchase a fully-occupied shopping center for $5,000,000. The NOI is $750,000. The property has no debt. You are considering obtaining debt in order to maximize your return. If a Lender is willing to provide a loan at a 75% LTV, 3.00% rate and 20-year amortization schedule, what is your: (a) Unlevered Return, and (b) Levered Return?

Expert Solution

a. unlevered return= return on investment/total value of the asset=750,000/5,000,000=.15 or 15%

b. levered return= return on investment- interest cost/value of asset+ loan

Value of loan = 5,000,000* 75%= 3,750,000

interest cost= 3,750,000* 3%= 112,500

Levered return= 750,000-112,500/(5,000,000+ 3,750,000) = .07825 or 7.825%

ekkarill92 answered 2 years ago

You purchase a brand-new property that had an NOI of $12 million last year (year 0)....

You purchase a brand-new property that had an NOI of $12 million last year (year 0). NOI is expected to grow at 5% a year. In order to maintain this growth, you hire a management team to manage the property and they charge 3% of NOI per annum. The risk-free rate is 1%. 1. You go to bank ABC to take out an amortized loan. The going-in cap rate for the property is 6%. They are willing to lend you...

A property has first year NOI of $1.5 million. NOI grows at 7% during the next...

A property has first year NOI of $1.5 million. NOI grows at 7% during the next two years. In year four, NOI goes drops 50% due to a lost tenant. You are very lucky and replace the tenant. Year five NOI is 4X year four. (continues below…) What is year 5 NOI? continue…You have a $10 million mortgage on this property, at 5% interest, amortization of twenty years. There are two partners who have invested $3 million total in the...

Perform a SWOT analysis for shopping Center. Do you think the shopping center administrators consider the...

Perform a SWOT analysis for shopping Center. Do you think the shopping center administrators consider the same factors when devising their strategy? word count 650.

You consider buying an investment commercial property in New York. This property is 100% occupied and...

You consider buying an investment commercial property in New York. This property is 100% occupied and has three tenants, whose leases have 10 years remaining until the end of the lease term. 1st tenant occupies 5,000 SF and pays the base rent of $10,000/month. 2nd tenant occupies 1,500 SF, paying the base rent of $2,500/month. 3rd tenant occupies 3,000 SF, paying the base rent of $5,000/month. All three tenants have the absolute Triple Net lease and 3% annual increase in...

Topic: Perform a SWOT analysis for shopping Center. Do you think the shopping center administrators consider...

Topic: Perform a SWOT analysis for shopping Center. Do you think the shopping center administrators consider the same factors when devising their strategy?Topic: Perform a SWOT analysis for shopping Center. Do you think the shopping center administrators consider the same factors when devising their strategy?

A property that can be purchased for $1.7 million has an expected first year NOI of...

A property that can be purchased for $1.7 million has an expected first year NOI of $190,000. An investor is considering two loan alternatives: LOAN A: A 70% loan-to-value ratio, with interest at 7.5% per annum. The loan will require level monthly payments to amortize the principle over 20 years. LOAN B: An 80% loan-to-value ratio, with interest at 8% per annum. This loan will require level monthly payments to amortize the principal over 25 years. Fore each loan, determine:...

A property has an NOI of $195,000 Using a 7.5% Cap Rate what is the value...

A property has an NOI of $195,000 Using a 7.5% Cap Rate what is the value of the property? Using an 8.5% Cap Rate would the value be lower or higher? If the property is being offered at $2.8M what is the indicated Cap Rate?

The topic is: Perform a SWOT analysis For any shopping Center. Do you think the shopping...

The topic is: Perform a SWOT analysis For any shopping Center. Do you think the shopping center administrators consider the same factors when devising their strategy? word Counting 750

You are considering the purchase of an apartment complex. Purchase price: $775,000 BTCF: Year NOI 1...

You are considering the purchase of an apartment complex. Purchase price: $775,000 BTCF: Year NOI 1 $103,085 2 $108,361 3 $113,875 4 $119,636 5 $125,651 Holding period is four years Cap rate is expected to be 7% in year 4 Selling expenses will be 5% of the sale price The 4-year Treasury bill rate is 3% and your risk premium for this project is 8% a) Calculate the NPV of this project assuming that you do not take any mortgages...

You are contemplating financing (interest only) on a $10,000,000 shopping center. A lender has offered a...

You are contemplating financing (interest only) on a $10,000,000 shopping center. A lender has offered a 70% LTV loan with an interest rate of 7%. Another lender is offering a mortgage loan for 80% LTV, but wants an 8% interest rate. What is the effective interest rate on the additional debt contemplated in the second loan? Ch12 a. 1.0% b. 15.0% c. 23.6% d. 19.0%

Question